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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                  FORM 10-QSB
 
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998.
 
                                       or
 
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
 
        FOR THE TRANSITION PERIOD FROM ______________ TO ______________
 
                        COMMISSION FILE NUMBER: 0-27800
 
                             FREDERICK BREWING CO.
       (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
 
                            ------------------------
 
<TABLE>
<CAPTION>
                        MARYLAND                                                 52-1769647
                ------------------------                                  ------------------------
<S>                                                       <C>
    (STATE OR OTHER JURISDICTION OF INCORPORATION OR                (I.R.S. EMPLOYER IDENTIFICATION NO.)
                     ORGANIZATION)
</TABLE>
 
                           4607 WEDGEWOOD BOULEVARD,
                           FREDERICK, MARYLAND 21703
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
 
                            ------------------------
 
                                 (301) 694-7899
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
                            ------------------------
 
                                 NOT APPLICABLE
   (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
                                    REPORT)
 
     Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
 
<TABLE>
<CAPTION>
                  TITLE OF EACH CLASS                      NUMBER OF SHARES OUTSTANDING AS OF SEPTEMBER 30, 1998
--------------------------------------------------------  --------------------------------------------------------
<S>                                                       <C>
            Common Stock, $0.00004 Par Value                                     13,905,393
</TABLE>
 
     Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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FREDERICK BREWING CO. INDEX TO FORM 10-QSB <TABLE> <CAPTION> PART I. FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements <S> <C> <C> Consolidated Balance Sheet (unaudited) September 30, 1998.......................................... 3 Consolidated Statements Of Cash Flows (Unaudited) Three and Nine Months Ended September 30, 1998 and 1997.......................................... 4 Consolidated Statements Of Operations (Unaudited) Three and Nine Months Ended September 30, 1998 and 1997.......................................... 5 Notes to Unaudited Consolidated Financial Statements............................................... 6 Item 2. Management's Discussion and Analysis................................................................. 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings.................................................................................... 16 Item 2. Changes in Securities................................................................................ 16 Item 3. Defaults Upon Senior Securities...................................................................... 16 Item 4. Submission of Matters to a Vote of Security Holders.................................................. 16 Item 5. Exhibits and Reports on Form 8-K..................................................................... 16 SIGNATURES................................................................................................... 17 </TABLE> 2

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FREDERICK BREWING COMPANY CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> SEPTEMBER 30, 1998 ------------- (UNAUDITED) <S> <C> ASSETS CURRENT ASSETS: Cash and cash equivalents.......................................................................... $ 190,077 Cash--restricted................................................................................... 12,475 Trade receivables, net of allowance for doubtful accounts of $35,076............................... 876,614 Inventories, net................................................................................... 916,310 Prepaid expenses and other current assets.......................................................... 325,800 ------------- Total Current Assets........................................................................... 2,321,276 ------------- Property and equipment, net........................................................................ 8,173,297 Intangibles, net................................................................................... 461,848 Goodwill, net...................................................................................... 2,551,839 Investment in joint venture........................................................................ 384 Other assets....................................................................................... 229,387 ------------- TOTAL ASSETS................................................................................... $13,738,031 ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt............................................................... $ 1,325,314 Capital lease obligations, current portion......................................................... 2,902,092 Accounts payable................................................................................... 1,249,975 Accrued liabilities................................................................................ 315,867 ------------- Total Current Liabilities...................................................................... 5,793,248 ------------- Long-term debt..................................................................................... 940,434 ------------- Total Liabilities.............................................................................. 6,733,682 ------------- ------------- STOCKHOLDERS' EQUITY: Preferred stock--$.01 par value, 1,000,000 shares authorized: Cumulative, convertible Series A, 1,643 shares and outstanding,.................................. 614,633 Convertible Series B, 0 shares issued and outstanding............................................ -- Convertible Series C, 0 shares issued and outstanding............................................ -- Convertible Series D, 0 shares issued and outstanding............................................ -- Convertible Series E, 360 shares issued and outstanding.......................................... 434,000 Convertible Series F, 1,000 shares issued and outstanding........................................ 795,100 Common stock--$0.00004 par value, 19,000,000 shares authorized, 13,905,393 shares issued and outstanding...................................................................................... 556 Additional paid-in capital......................................................................... 20,057,281 Accumulated deficit................................................................................ (14,897,221) ------------- Total stockholders equity...................................................................... 7,004,349 ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................................... $13,738,031 ------------- ------------- </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 3

FREDERICK BREWING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- -------------------------- 1998 1998 ----------- 1997 ----------- 1997 ----------- ----------- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net loss................................................ $(735,493) $(1,211,591) $(3,407,500) $(2,764,335) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization......................... 270,178 197,330 774,401 462,716 Write-off of net deferred public relations costs...... -- 1,089,000 -- Equity in loss of investee............................ (384) -- (384) -- Loss on sale of equipment............................. -- 99,545 -- Change in operating assets and liabilities: Trade receivables.................................. (158,113) (105,985) (495,244) (297,028) Inventories........................................ (75,474) (110,762) (438,301) (207,166) Prepaid expenses and other current assets.......... (85,174) 82,332 (221,190) (274,315) Other assets....................................... 13,266 (41,604) (9,830) (676,118) Accounts payable................................... 359,647 (61,325) 931,979 (223,243) Accrued liabilities................................ (190,990) -- (91,076) -- ----------- ----------- ----------- ----------- Net cash used for operating activities.................. (602,537) (1,251,605) (1,768,600) (3,979,489) ----------- ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment...................... (87,123) (489,165) (320,356) (1,969,064) Purchase of intangibles................................. (14,463) (16,002) (105,174) (142,896) Purchase of business, net of cash acquired.............. -- -- (834,611) -- Proceeds from sale of equipment......................... -- -- 94,060 154,600 ----------- ----------- ----------- ----------- Net cash used for investing activities.................. (101,586) (505,167) (1,166,081) (1,957,360) ----------- ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt............................ -- -- -- 1,636,485 Payments on debt obligations & capital leases........... (96,717) (224,481) (283,222) (1,936,417) Proceeds from issuance of preferred stock, net.......... 359,100 1,768,245 359,100 5,793,246 Proceeds from issuance of common stock, net............. 436,000 -- 436,000 -- Restricted cash......................................... -- (4,439) -- 612,888 ----------- ----------- ----------- ----------- Net cash provided by financing activities............... 698,383 1,539,325 511,878 6,106,202 ----------- ----------- ----------- ----------- NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS.... (5,740) (217,447) (2,422,803) 169,353 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................................ 195,817 435,790 2,612,880 48,990 ----------- ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD................ $ 190,077 $ 218,343 $ 190,077 $ 218,343 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 4

FREDERICK BREWING COMPANY CONSOLIDATED STATEMENT OF OPERATIONS <TABLE> <CAPTION> THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, -------------------------- -------------------------- 1998 1998 ----------- 1997 ----------- 1997 ----------- ----------- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> Gross Sales............................................ $ 1,603,212 $ 1,072,961 $ 4,213,059 $ 2,214,191 Less: Depletions, allowances, and excise taxes......... 189,595 147,363 490,340 305,127 ----------- ----------- ----------- ----------- Net sales......................................... 1,413,617 925,598 3,722,719 1,909,064 Cost of sales..................................... 1,071,373 813,071 2,851,091 1,940,890 ----------- ----------- ----------- ----------- Gross profit (loss)............................... 342,244 112,527 871,628 (31,826) Selling, general and administrative expenses........... 863,277 1,228,191 2,665,688 2,663,738 Minority Interest...................................... 4,985 -- 4,985 -- Write-off of net deferred public relations costs....... -- -- 1,089,000 -- ----------- ----------- ----------- ----------- Operating loss.................................... (526,018) (1,115,664) (2,888,045) (2,695,564) (Gain)/loss on sale of equipment....................... -- -- 99,545 (135,523) Interest expense, net.................................. 209,475 95,927 419,910 204,294 ----------- ----------- ----------- ----------- Net loss before tax provision.......................... (735,493) (1,211,591) (3,407,500) (2,764,335) Provision for income taxes............................. -- -- -- -- ----------- ----------- ----------- ----------- Net loss............................................... (735,493) (1,211,591) (3,407,500) (2,764,335) Preferred stock deemed dividend requirements........... (247,000) (928,626) (275,627) (2,283,080) ----------- ----------- ----------- ----------- Net loss attributable to common shareholders........... $ (982,493) $(2,140,217) $(3,683,127) $(5,047,415) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- BASIC AND DILUTED LOSS PER COMMON SHARE: Net loss before preferred stock dividend requirements.................................... $ (0.05) $ (0.44) $ (0.36) $ (1.23) Preferred stock dividend requirements............. (0.02) (0.34) (0.03) (1.02) ----------- ----------- ----------- ----------- Net loss per common share......................... $ (0.07) $ (0.78) $ (0.39) $ (2.25) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average common shares outstanding............. 13,562,750 2,736,333 9,346,720 2,239,173 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- </TABLE> 5

FREDERICK BREWING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 (UNAUDITED) NOTE 1--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the interim financial position and the interim results of operations of the Company have been included. Operating results for the three and nine months ended September 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998, or for any other period. For information relating to the financial position and the results of operations and cash flows of the Company as of and for the year ended December 31, 1997, refer to the financial statements included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1997 and in its 1997 Annual Report to shareholders. NOTE 2--PRINCIPLES OF CONSOLIDATION The consolidated financial statements as of and for the three and nine months ended September 30, 1998 include the accounts of the Company and its wholly-owned subsidiaries, Wild Goose Brewery, Inc. (Wild Goose) and Brimstone Brewing Company, Inc. (Brimstone), from their dates of acquisition during the first quarter of 1998. (see Note 3) All significant intercompany accounts and transactions have been eliminated in consolidation. NOTE 3--ACQUISITIONS In January 1998, the Company acquired 100% of the outstanding equity securities (comprised of 50,000 shares of preferred stock and 10,000 shares of common stock) of Wild Goose and all of the brands, formulas, copyrights, trademarks and related intangible assets of Brimstone. The consideration paid for Wild Goose consisted of the issuance of 1,192,086 shares of the Company's common stock with an aggregate value of $2,419,935 plus the repayment of approximately $532,000 in notes payable and the assumption of other liabilities. A total of 123,153 shares of the common stock are being withheld by the Company to account for any undisclosed liabilities or uncollectible accounts which may be discovered. The consideration paid for Brimstone consisted of 80,000 shares of the Company's common stock with a value of $162,000. Both the Wild Goose and Brimstone acquisitions were accounted for under the purchase method of accounting. The purchase price for each acquisition has been allocated to the assets acquired and liabilities assumed, based on their estimated fair values. The $2,734,113 excess of the purchase price over the net assets acquired was recorded as goodwill and is being amortized over 10 years. Results of operation for Wild Goose and Brimstone are included with those of the Company subsequent to the date of acquisition. Results for the three and nine months ended September 30, 1998 reflect that all production of Brimstone and Wild Goose products was transferred to the Company's facility in January and February, respectively, that operations at the Wild Goose brewery ceased as of the effective date of the acquisition (January 29, 1998) and that the Company's gross sales from the dates of acquisition to September 30, 1998 included $156,000 of Brimstone products and $1,414,000 of Wild Goose products. The following unaudited pro forma summary presents the consolidated results of operations as if the acquisitions had been completed at the beginning of the periods presented and does not purport to be indicative of 6

FREDERICK BREWING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED) NOTE 3--ACQUISITIONS--(CONTINUED) what would have occurred had the acquisitions actually been made as of such date or of results which may occur in the future. <TABLE> <CAPTION> NINE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 ------------------ ------------------ <S> <C> <C> Net sales............................................. $ 3,877,750 $ 3,616,000 Net loss.............................................. $ 3,421,244 $ 2,970,000 Basic & diluted loss per common share................. $ (0.39) $ (2.25) </TABLE> NOTE 4--INCOME TAXES The Company accounts for income taxes under the asset and liability method. The Company has not recorded a provision for income taxes for the nine month periods ended September 30, 1998 and 1997 based on the fact that the Company has incurred net operating losses during those periods. The Company has provided a full valuation allowance against its net deferred tax asset as of September 30, 1998. NOTE 5--LONG-TERM DEBT During 1996, the Company entered into agreements to have a new brewery built by Blue II, LLC, a limited liability company affiliated with certain directors of the Company ('Blue II'). Blue II constructed the new brewery building to the Company's specifications and is leasing the building to the Company. On July 19, 1996, in connection with the purchase of the equipment to be housed in the new brewery, the Company obtained a $1,500,000 revenue bond from the Maryland Economic Development Corporation ('MEDCO') and a $969,000 bridge loan from a bank which has been repaid. The $1,500,000 revenue bond was immediately assigned by MEDCO to a bank. In connection with the $1,500,000 revenue bond, the bank issued a note to the Company from the proceeds of the revenue bond. There are certain restrictive covenants existing on the $1,500,000 note payable to the bank. Among those covenants is a cash flow to debt service ratio. Violation of this or any other covenant would represent an event of default on the note and also a cross default on a $3,000,000 loan obtained by Blue II for the construction of the brewery for which the Company is a guarantor. For both the $1,500,000 loan and $3,000,000 Blue II loan, the bank has waived compliance with the cash flow to debt service covenant for the calendar quarters ending March 31, 1998, June 30, 1998 and September 30, 1998. The bank has also modified this covenant for the calendar quarter ending December 31, 1998 and for each quarter thereafter whereby the Company must maintain a cash flow to debt service ratio of 1.0 to 1. In addition, the bank has modified the current ratio covenant whereby the Company must maintain a ratio of current assets to current liabilities of 1.0 to 1 as of calendar quarter ended March 31, 1998 and each calendar quarter thereafter. As of September 30, 1998, the Company was in violation of the current ratio convenant which represents an event of default on the Company's loan and the Blue II loan. The Company is seeking a waiver from the bank relative to this violation. In exchange for these covenant modifications, the maturity date on the loans and the related capital lease obligation to Blue II was revised to May 1, 1999, the interest rate increased to the prime rate plus 1.25% for the Company's loan and the prime rate plus 1.5% for the Blue II loan, the Company paid a loan modification fee of $25,000 in two installments of $10,000 and $15,000 on June 30, 1998 and September 30, 1998, respectively, and is responsible for all fees and expenses incurred by the bank in connection with preparation of the modification and will use its best efforts to obtain replacement financing. The Company and Blue II are currently negotiating with a local financial institution to refinance the Company's long-term debt. If such a refinancing occurs, it is likely that the interest rates will rise, the Company's rent payment to Blue II will rise and the Company's Chief Executive Officer and President will be required to provide personal guarantees of the $1,500,000 bond and the Blue II building lease. While management believes this debt refinancing will be completed during the fourth 7

FREDERICK BREWING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED) NOTE 5--LONG-TERM DEBT--(CONTINUED) quarter of 1998, no assurance can be given that this will occur. As of September 30, 1998, the Company's current liabilities exceed its current assets. Management must obtain an extension on the maturity date of these loans or an alternative financing arrangement to continue funding its current operations and meet its current obligations as they came due. NOTE 6--BASIC AND DILUTED LOSS PER COMMON SHARE Effective December 31, 1997, the Company adopted Statement of Financial Accounting Standards No. 128, 'Earnings Per Share,' which requires the presentation of basic earnings per share and diluted earnings per share for all periods presented. Basic earnings per share is based on the weighted average number of outstanding common shares for the period. Diluted earnings per share adjusts the weighted average for the potential dilution that could occur if stock options, warrants, or other convertible securities were exercised or converted into common stock. Diluted earnings per share equals basic earning per share for all periods presented because the effect of such items was anti-dilutive. NOTE 7--NEW ACCOUNTING STANDARDS In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, 'Reporting Comprehensive Income,' and No. 131, 'Disclosures about Segments of an Enterprise and Related Information,' which are both effective for the year ending December 31, 1998. SFAS No. 130 establishes standards for reporting comprehensive income in a full set of general purpose financial statements either in the income statement or in a separate statement. SFAS No. 131 establishes standards for reporting information about operating segments, including related disclosures about products and services, geographic areas and major customers. The Company has adopted SFAS No. 130 during the first quarter of 1998 and has no items of comprehensive income to report. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, 'Accounting for Derivative Instruments and Hedging Activities.' This Statement requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company will be required to adopt this new accounting standard by January 1, 2000. Management does not anticipate early adoption. The Company believes that the effect of adoption of SFAS No. 133 will not be material. NOTE 8--ISSUANCES OF COMMON STOCK During the three months ended September 30, 1998, the Company issued 2,310,759 shares of common stock upon the conversion of 100 shares of Series C, 1405 shares of Series E Preferred Stock, and the exercise of 1558 employee stock options. The Company also issued 573,476 shares of Restricted common stock on August 3, 1998 for gross proceeds of $500,000. These shares were subsequently converted into 500 shares of Series F Preferred Stock (see Note 9). NOTE 9--ISSUANCE OF SERIES F PREFERRED STOCK On September 2, 1998, the Company issued 1,000 shares of Series F Preferred Stock for $500,000 in cash and the conversion of 573,476 shares of restricted common stock. The Series F shares are immediately convertible into common stock at the lesser of $0.70 per share or 80% of the average of the three lowest closing bid prices of the common stock for the seven days preceding the conversion. The Company has recorded a deemed dividend of $247,000 and $275,000 for the three and nine months ended September 30, 1998 to reflect 8

FREDERICK BREWING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED) NOTE 9--ISSUANCE OF SERIES F PREFERRED STOCK--(CONTINUED) the beneficial conversion feature related to this preferred stock issuance. The deemed dividend was recognized immediately upon the issuance of the Series F shares. In connection with the issuance of the Series F Preferred Stock the Company issued 200,000 warrants with exercise prices ranging from $0.75 per share to $0.98 per share. The Company determined the aggregate value of these warrants on the date of grant to be approximately $74,600, based on the Black Scholes valuation model. This value was recorded as a cost of the Series F offering and deducted from the proceeds. 9

PART I.--FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 OVERVIEW OF SIGNIFICANT ACTIVITIES AND EXPENSES A net loss of ($735,493) or ($0.05) per common share was incurred during the third quarter of 1998. This compares to a net loss of ($1,211,591) or ($0.44) per common share during the third quarter of 1997, before preferred stock deemed dividends. The year-to-date 1998 net loss is ($3,407,500) or ($0.36) per common share, versus a 1997 year-to-date net loss of ($2,764,335) or ($1.23) per common share, again excluding the effects of the deemed dividends. There were 13,562,750 weighted average common shares outstanding during the three months ended September 30, 1998, and 9,346,720 weighted shares outstanding during the nine months ended September 30, 1998. During 1997, there were 2,736,333 weighted common shares outstanding in the third quarter, and 2,239,173 weighted shares year-to-date. The increase in shares between the third quarters of 1997 and 1998 relates primarily to the conversion of certain of the Company's Preferred shares into common stock, and the issuance of common stock due to the acquisition of Wild Goose Brewery, Inc. and Brimstone Brewing Company. Taking into account the deemed dividends, which represent non-cash charges for the discount feature associated with the Company's Series F Preferred Stock (see Note 9 to Financial Statements, page 4, above), the net loss attributable to common shareholders was ($982,493) or ($.07) per common share in the current quarter versus ($2,140,217) or ($0.78) per common share in the third quarter of 1997 and ($3,683,127) or ($.39) per share for the first nine months of 1998 versus ($5,047,415) or ($2.25) per share in 1997. The third quarter saw significant improvements in several key measures of the Company's operations. The cost of sales, a measure of production costs, fell to $116.04 per barrel from $142 per barrel in the same period in 1997. This improvement was due largely to increased utilization of plant capacity which reduced plant overhead expenses per barrel by $9.56 and a reduction of direct labor and materials expenses by $16.12 per barrel. The Company's operating loss was reduced by $590,076 to $526,018 in the third quarter of 1998, compared to $1,115,664 during the same period of 1997. Despite a gross sales increase of 49%, SG&A expenses decreased by 32% over the same period of the previous year. During the third quarter of 1998 record quarterly sales levels were achieved. The Company's gross sales increased 49.4% to $1,603,212 from $1,072,961 in the third quarter of 1997, on shipments of 9,233 barrels in the current period and 5,737 barrels in 1997. Year-to-date 1998 gross sales of $4,213,059 were 90% greater than the $2,214,191 recorded in the first nine months of 1997. The quarterly and year-to-date sales growth is largely attributable to: (1) sales of the Wild Goose and Brimstone brands which were acquired in the first quarter of 1998; (2) sales of Hempen Ale and Hempen Gold which were introduced during the second and third quarters of 1997 respectively and the geographic distribution of which has increased steadily; and (3) the Company's new and upgraded brewing and packaging facilities and equipment, which reached full capacity in June of 1997. Management believes that caution should be exercised when comparing 1997 and 1998 quarterly and year-to-date sales results. Because production at the new brewery did not reach full capacity until June of 1997, the Company was unable to produce sufficient quantities of all products, which artificially depressed sales in the first and second quarters of last year. Direct production labor costs were higher during these periods because the automated packaging equipment did not become fully operational until the third quarter of 1997. These factors are partially off-set by the fact that the Company had not drawn down all of the loans or received all of the leased equipment used to construct and outfit the new brewery until late in the second quarter and, consequently, interest, depreciation and equipment lease expenses were lower during the first half of 1997 than in subsequent periods. Also, both Hempen Ale and Hempen Gold first became available for full distribution during the third quarter of 1997, which led to high levels of initial orders from numerous wholesale distributors, temporarily boosting sales in that period. Therefore comparisons of revenues, production costs, interest and other expenses between 1997 and 1998 may not be fully indicative of the Company's business trend or prospects. Management does believe, however, that the trends demonstrated by third quarter results will continue to positively effect sales, production costs and selling, general and administrative expenses. The sales increases 10

expected from the integration of the Wild Goose and Brimstone brands appear to have materialized, as have the production efficiencies expected as the result of higher production and sales volumes. On-going selling, general and administrative expenses have declined both as compared to the third quarter of 1997 and as compared to the second quarter of 1998, as the result of cost-cutting measures taken earlier in the year and further reductions are expected in the next two quarters. REVIEW OF OPERATIONS The following table sets forth certain items derived from the Company's Statements of Operations, expressed as a percentage of net sales, for the three month periods ended September 30, 1998 and 1997. FREDERICK BREWING CO. SUMMARY FINANCIAL AND OPERATING DATA <TABLE> <CAPTION> PERCENTAGE OF NET SALES FOR THE PERIODS ENDED SEPTEMBER 30 ------------------------------------ THREE MONTHS NINE MONTHS 1998 1997 1998 1997 ------ ------ ------ ------ <S> <C> <C> <C> <C> Gross Sales.................................................................. 113.4% 115.9% 113.2% 116.0% Less Depletions, allowances and excise taxes................................. 13.4 15.9 13.2 16.0 ------ ------ ------ ------ Net Sales.................................................................... 100.0 100.0 100.0 100.0 Cost of Sales................................................................ 78.7 89.5 79.3 101.4> ------ ------ ------ ------ Gross Profit/(Loss).......................................................... 21.3 10.5 20.7 (1.4) Selling, General and Administrative Expenses................................. 53.8 114.5 63.4 120.3 Write-off of Net Deferred Public Relations Costs............................. 0.0 0.0 25.8 0.0 ------ ------ ------ ------ Operating Loss............................................................... (32.5) (104.0) (68.5) (121.7) (Gain)/Loss on Sale of Equipment............................................. 0.0 0.0 (2.4) 6.1 Interest Expense, net........................................................ (13.4) (8.9) (10.0) (9.2) ------ ------ ------ ------ Net Loss..................................................................... (45.9) (112.9) (80.9) (124.8) ------ ------ ------ ------ ------ ------ ------ ------ </TABLE> PER BARREL OPERATING DATA <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30(1) SEPTEMBER 30(1) ------------------ ------------------ 1998 1997 1998 1997 ------- ------- ------- ------- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> Barrels sold.......................................................... 9,233 5,737 23,800 12,277 Gross sales per barrel sold........................................... $173.64 $187.02 $177.02 $180.35 Net sales deductions per barrel....................................... 20.53 25.69 20.60 24.85 Cost of sales per barrel sold: Direct Materials................................................. 58.13 67.02 58.83 76.04 Direct Labor..................................................... 10.71 17.94 11.50 15.96 Production overhead--Variable.................................... 12.75 20.85 13.83 21.03 Production overhead--Fixed....................................... 34.45 35.91 35.63 45.06 Total costs per barrel sold...................................... 116.04 141.72 119.79 158.09 Gross profit per barrel sold.......................................... $ 37.07 $ 19.61 $ 36.63 $ (2.59) </TABLE> ------------------ (1) 1997 volumes do not include Wild Goose or Brimstone brand sales. SALES Gross sales in the third quarters of 1998 and 1997 were $1,603,212 and $1,072,961 respectively, an increase of $530,251 or 49.4%. Year-to-date sales were $4,213,059 in 1998, and $2,214,191 in 1997, a year to year increase of $1,998,868 or 90.3%. Sales of Wild Goose and Brimstone products began late in the first quarter of 11

1998, and contributed $610,592 and $93,662 respectively to third quarter gross sales, and $1,137,592 and $177,662 respectively to year-to-date gross sales. Third quarter volumes shipped were 9,233 barrels in 1998 and 5,737 barrels in 1997, an increase of 3,496 barrels or 60.9%. Year-to-date volumes shipped were 23,800 barrels in 1998, and 12,277 barrels in 1997, a year to year increase of 11,523 barrels or 93.9%. Gross revenues per barrel were $173.64 in the third quarter of 1998 and $187.02 in the third quarter of 1997, a decrease of $13.38 per barrel. Year-to-date per barrel gross revenues were $177 in 1998 and $180 in 1997, a decrease of $3 per barrel. The decrease for the year-to-date was caused entirely by the decrease in the current quarter. Revenues per barrel were somewhat inflated in the third quarter of 1997 because an unusually high proportion of sales in that period consisted of higher-priced Hempen Ale and Hempen Gold. In addition, during the third quarter of 1998, the Company exported to Ontario, Canada for the first time. The Company sells this beer at a reduced price partly because it does not pay excise taxes and incurs lower selling costs on those shipments. Those costs are added to the price paid by Canadian retailers by the Liquor Control Board of Ontario. The Company also sold a significant quantity of beer to a beer club during the third quarter of 1998 at a lower price, reflecting lower packaging and selling costs incurred on those sales. RETURNS, DEPLETIONS AND EXCISE TAXES Returns, depletion and other allowances (the cost of the Company's contribution to volume discounts and marketing materials offered and used by wholesalers to retailers) and excise taxes were $6,200 (0.4% of net revenues); $131,498 (9.3%) and $51,900 (3.7%); respectively during the third quarter of 1998, for a total of $189,600 (13.4% of net revenues) compared to $8080(.08%); $87,500(8.1%); and $51,800(7.0%), respectively, for a total of $147,380 (15.9% of net revenues) during the third quarter of 1997. For the nine months ending September 30, 1998, returns, depletion and other allowances and excise taxes were approximately $53,400 (1.4% of net revenues); $248,900 (6.7%); and $183,000 (4.9%), respectively; for a total of $490,300 (13.2% of net revenues) compared to $37,500 (3.8%); $60,100 (6.1%); and $60,164 (6.1%), respectively; for a total of $157,764 (16% of net revenues) for the first nine months of 1997. The higher rate of returns and discounts in 1997 resulted from the Company's effort to reduce wholesaler inventory levels in the first quarter, in anticipation of new packaging and higher quality product from the new brewery. State excise taxes vary, depending on where the beer is to be sold. In some jurisdictions, including Maryland and Pennsylvania, the brewer is required to pay the tax while in others, such as the District of Columbia and Virginia, the tax is paid by the wholesale distributor to whom the beer is shipped. State excise tax rates vary from state to state, as well. The Company currently also pays a $7 per barrel federal excise tax on all beer sold in the United States. The increase in excise taxes paid was caused by the higher volume shipped. The reduction in excise taxes as a percentage of sales in the current quarter reflects the lack of excise taxes paid on the Canadian shipments, changes in geographic distribution and an adjustment of certain accruals for excise taxes on prior period shipment. COST OF SALES Third quarter cost of sales for 1998 and 1997 were $993,071 and $813,071 respectively, (or 70.3% and 87.8% of net sales), an increase of $180,000 or 22.1% over 1997 on a gross sales increase of 49.4%. Year-to-date costs of sales were $2,772,789 in 1998 and $1,940,890 in 1997 (or 74.5% and 101.7% of net sales respectively) an increase of $831,899 (42.9%) on a net sales increase of 95.0%. Production costs as a percentage of revenues declined primarily because of the large increase in plant capacity utilization brought about by the increase in sales. Production overhead expenses (management and supervisory salaries, quality assurance and brewery repairs and maintenance expenses, depreciation charges, utilities, equipment rentals and lease payments) declined from $56.76 per barrel ($325,632 on 5,737 barrels) in the third quarter of 1997 to $47.20 per barrel ($435,797 on 9,233 barrels) in the third quarter of 1998. Production overhead expenses for the first nine months of 1998 were $1,177,148 ($49 per barrel), and $811,387 ($66 per barrel) in 1997. The increase in production overhead was primarily the result of owning, maintaining and operating the new brewery for all the 1998 period compared to only a portion of the same period in 1997. Direct variable product costs (ingredients, packaging materials and direct production labor) were $635,600 ($69 per barrel) during the third quarter of 1998 compared to $487,416 ($85 per barrel) in 1997. For the first half 12

of 1998, direct variable costs were $1,673,854 ($70 per barrel), compared to $1,129,484 ($92 per barrel) in 1997. Bulk purchasing of raw ingredients, primarily malted barley, glass bottles, and paper packaging materials, which began during the second quarter of 1997 accounted for some of the reduction in year-to-year per unit direct costs. Improved labor productivity made possible by larger batch sizes and a higher degree of automation accounted for the remainder of the direct reduction. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses ('SG&A') were $863,277 and $1,228,191, a decrease of $364,914 (32%), in the third quarters of 1998 and 1997, respectively, or 61% and 132.7% of net sales in the two periods. For the nine months ended September 30, SG&A increased by .12% to $2,665,688 (72.6% of net sales) in 1998 compared to $2,663,738 (139.5% of net sales) in 1997. The Company instituted an SG&A expense reduction program during the second quarter of 1998. The goal of the program was to reduce annual personnel-related expenditures by approximately $375,000 below first quarter 1998 levels. Six salaried staff positions were eliminated, and senior management accepted salary reductions in exchange for restricted stock. Additional expense reductions were also instituted during the third quarter. Compared to the second quarter of 1998, recurring SG&A expenses for the third quarter were reduced by $191,794 (18%) on nearly flat sales volumes indicating that the overhead expense reduction program is generating positive results. Management expects to further reduce overhead expenses in the fourth quarter. Additional expense reductions have been budgeted for 1999 and are expected to lead to further savings in the first half of next year. INTEREST EXPENSE (NET) Net interest expense was $209,475 in the third quarter of 1998 compared with $95,927 in 1997. Year-to-date 1998 net interest expense was $419,910 reflecting interest income of $11,851 and interest expense of $431,761, versus a 1997 net interest expense of $204,294. INCOME TAX PROVISION The Company has incurred net operating losses during both 1998 and 1997 and, accordingly, no provisions for income taxes have been provided on the Statements of Operations. The Company has recorded a full valuation allowance against the net deferred tax asset. LIQUIDITY AND CAPITAL RESOURCES Due to losses experienced during the start-up, rapid expansion of Company operations and brand acquisitions, operations to date have been funded primarily from private and public placements of common and preferred stock and by loans from stockholders and financial institutions. As of September 30, 1997, the Company had working capital of $311,450. The Company will require additional working capital to fund its operations in the near term. Management is working with several financial intermediaries in efforts to raise additional working capital, through long-term debt or equity or both. While management is confident that these efforts will succeed, no assurance can be given that the needed working capital will be obtained or if so that it will be offered on terms acceptable to the company or its secured lender. Failure to raise the required working capital would result in the Company being unable to continue its business. On August 3, 1998, the Company closed a private placement of 573,476 shares of restricted common stock for gross proceeds of $500,000 with two foreign investors. On September 2, 1998, the Company closed an additional private placement for an additional $500,000 with the same two investors. As a condition of the second financing, the company agreed to redeem the previously issued restricted common stock and issued a total of $1,000,000 in Series F Convertible Preferred Stock to those investors. A registration statement on Form S-3 was filed with respect to the underlying common stock on October 2, 1998. The proceeds of these offerings were used for working capital, the purchase and installation of brewery equipment to improve wastewater treatment systems to governmentally required standards and reduce labor costs and for the design and production of new packaging and marketing to be used in the production of new brands acquired via strategic alliances. 13

The commercial mortgage on the land and building comprising the Company's brewery and the term loan secured by the Company's brewing equipment, current assets, trademarks and goodwill are due to be paid in full to First Union National Bank on April 1, 1999. Management has worked with the owner of the real estate assets, Blue II LLC, to refinance the mortgage loan and expects that this loan will be re-financed on a long-term basis during the fourth quarter of 1998 by a local commercial bank. Management has applied to similarly refinance the equipment loan. Management is confident that both loans will be re-financed on a long-term basis before the end of 1998. However, the Company does not have a legally binding commitment for re-financing either loan. Consequently, both the equipment loan and the Company's capital lease obligation have been re-classified from long-term liabilities to current liabilities, reflecting the fact that the obligations are due in full within one year of the date of this report (See Note 5 to Financial Statements, page 3). Net cash used for operations in the third quarter of 1998 was $602,537, versus $1,251,605 in the third quarter of 1997. Year-to-date net cash used for operations was $1,768,600 in 1998 and $3,979,489 in 1997. Net cash used for investing was $101,970 in the third quarter of 1998 versus $505,167 in the third quarter of 1997. Investment funds used year-to-date was $1,166,465 in 1998, and $1,957,360 in 1997. Net cash provided from financing in the third quarter of 1998 was $698,383 versus $1,539,325 for the same period in 1997. Financing usage called for $511,878 year-to-date 1998 versus an inflow of funds of $6,106,202 in 1997 due to greater proceeds from issuance of preferred stock in 1997. The Company, however, has received a letter dated September 15, 1998 (the 'Notice Letter') from the Nasdaq Stock Market, Inc. ('Nasdaq') stating that the common Stock may be delisted from the Nasdaq SmallCap Market for failure to maintain a minimum bid price of $1.00 per share. The Notice Letter further stated that the Common Stock had failed to maintain a closing bid price greater than or equal to $1.00 per share during the thirty consecutive trading days prior to September 15, 1998. The Notice Letter further stated that if the Company failed to demonstrate compliance through achieving a closing bid price of $1.00 per share for ten consecutive trading days during the ninety calendar day period ending December 14, 1998, the Common Stock would be subject to delisting. Delisting of the Common Stock would adversely affect the price of the Common Stock and the ability of holders to sell their shares. In addition, in order to be relisted on Nasdaq, the Company would be required to comply with the initial listing requirements, which are substantially more onerous than the listing maintenance standards. IMPACT OF INFLATION Although the Company has not attempted to calculate the effect of inflation, management does not believe inflation has had a material effect on its results of operations. Material increases in costs and expenses, particularly packaging, raw material and labor costs, in the future, could have a significant impact on the Company's operating results to the extent that the effect of such increases cannot be transferred to its customers. IMPACT OF YEAR 2000 ISSUE The Company is implementing a comprehensive project plan to identify internal and external systems which may require modification or upgrade to be made Year 2000 compliant. A complete inventory and assessment of these systems is expected to be concluded by the end of 1998. Remediation and testing of non-Year 2000 compliant systems is expected to be completed by the end of the third quarter 1999. As part of this project the Company expects to develop contingency plans by the third quarter of 1999 which identify workarounds in the event of a malfunction of a system designated as a priority system. In addition, the Company is in the process of identifying suppliers of key goods and services to all business areas, and requesting information on a continuing basis into 2000, and, to develop contingency plans where the information provided raises significant concerns about a vendors ability to supply the Company on an uninterrupted basis during the 2000 transition. To date, costs directly related to Year 2000 remediation efforts are immaterial. The Company believes that the cost of modifications necessary to become Year 2000 compliant will not be material. There can be no assurance, however, that the Company will be able to identify all aspects of its business that are subject to Year 2000 problems, or identify Year 2000 problems of customers or suppliers that affect the Company's business. There also can be no assurance that the Company's software vendors are correct in their assertions that the software is 14

Year 2000 compliant or that the Company's estimate of the costs of systems preparation for Year 2000 compliance will prove ultimately to be accurate. FORWARD-LOOKING INFORMATION The Private Securities Litigation Reform Act of 1995 provides a 'safe harbor' for certain forward-looking statements made by the Company in its disclosures to the public. There is certain information contained herein, in the Company's press releases and in oral statements made by authorized officers of the Company which are forward-looking statements, as defined by such Act. When used herein, in the Company's press releases and in such oral statements, the words 'estimate,' 'project,' 'anticipate,' 'expect,' 'intend,' 'believe,' 'plans,' and similar expressions are intended to identify forward-looking statements. Because such forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. 15

PART II. OTHER INFORMATION FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 FREDERICK BREWING CO. ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES During the three months ended September 30, 1998, the Company issued 2,310,759 shares of common stock upon the conversion of 100 shares of Series C, 1405 shares of Series E Preferred Stock, and the exercise of 1558 employee stock options. As a result, 13,905,393 of the Company's 19,000,000 authorized shares of common stock had been issued, as of September 30, 1998. On September 2, 1998, the Company issued 1,000 shares of Series F Preferred Stock in a private placement with two investors. The Series F Preferred Stock is convertible into common stock at the lesser of $0.70 or eighty percent (80%) of the average of the three lowest closing bid prices of the common stock for the seven days preceding the conversion. As of November 2, 1998, an additional 372,135 shares had been issued upon the conversion of 150 shares of Series E Preferred Stock for a total of 14,277,529 common shares, 1643 Series A Preferred Shares and 210 shares of Series E Preferred Stock and 1,000 Series F Preferred Shares outstanding. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Due to the fact that certain long-term debt and capital lease obligations have to be re-classified as current liabilities, the Company will be in violation of modified covenants in both loans made by First Union National Bank which require the Company to maintain a current ratio of not less than 1:1. Management believes the Bank will waive this violation for the balance of 1998, given current efforts to re-finance both loans. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Filed: Index to Exhibits <TABLE> <C> <S> 10 Material Contracts None. 27 Financial Data Schedule 99 Safe Harbor Under the Private Securities Litigation Reform Act of 1995 99.1 Press Release, July 20, 1998 99.2 Press Release, July 20, 1998 99.3 Press Release, August 10, 1998 99.4 Press Release, August 17, 1998 99.5 Press Release, August 28, 1998 99.6 Press Release, September 14, 1998 99.7 Press Release, September 14, 1998 99.8 NASDAQ Letter </TABLE> (b) Reports on Form 8-K As filed on April 10, 1998. 16

SIGNATURES In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FREDERICK BREWING CO. <TABLE> <S> <C> Date November 5, 1998 /s/ KEVIN E. BRANNON Kevin E. Brannon Chairman of the Board and Chief Executive Officer Date November 5, 1998 /s/ LESLIE P. HARPER Leslie P. Harper Chief Financial Officer </TABLE> 17

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                                                                    Exhibit 99.1

FOR IMMEDIATE RELEASE:                           CONTACT: Andrea J. Keller
July 20, 1998                                             Frederick Brewing Co.
                                                          301-694-7899, x120

                          Wild Goose Brewery Goes Nuts
                             Over New Seasonal Beer
             Wild Goose(TM) Nut Brown Ale Available August 17, 1998


FREDERICK, MD--Wild Goose Brewery announced today the return of its famous fall
seasonal, Nut Brown Ale. First released in 1996, Wild Goose(TM) Nut Brown Ale is
brewed in the classic London style--nutty-tasting, well-rounded and rich, with
pale, amber and chocolate malts, and English Northdown hops and East Kent
Goldings for a smooth finish. A true British "session ale" to be shared with
friends.

Wild Goose(TM) Nut Brown Ale Specifications:
MALTS:                     Pale, Crystal, Amber, Chocolate, Carapils, Wheat
HOPS:                      Northdown, East Kent Goldings
BITTERNESS:                Low to Medium
COLOR:                     Medium brown
GRAVITY:                   12.5 Plato (1.050 O.G.)
ALCOHOL:                   5.2%


One of the East Coast's first microbreweries, Wild Goose Brewery, Inc. was
founded in 1989. Since then, Wild Goose(TM) has been known for its traditional,
hand-crafted, English-style ales, which are made with only the finest imported
British malted barley and Ringwood yeast. Named one of the "Top 10 Breweries of
the Year" by the 1997 World Beer Championships, Wild Goose(TM)'s award-winning,
year-round styles include Wild

                                    - more -

Wild Goose Brewery Releases Nut Brown Ale Page 2 of 2 Goose(TM) India Pale Ale, Wild Goose(TM) Amber, Wild Goose(TM) Porter and Wild Goose(TM) Oatmeal Stout. Founded in 1992 with the Blue Ridge brand of beers, Frederick Brewing Co. completed an initial public offering (IPO) in 1996. In March 1997, the company moved from a converted warehouse to a purpose-built, 57,000 square foot facility. In December 1997, FBC acquired two other microbreweries, Wild Goose Brewery and Brimstone Brewing Co., creating the largest craft brewery in the Mid-Atlantic region. Today, Frederick Brewing Co.'s award-winning beers are sold in 31 states and the District of Columbia. FBC shares are traded under the NASDAQ symbol: BLUE. Free public tours and tastings are held at Frederick Brewing Co.'s brewery every Saturday and Sunday at 1:30 p.m. Reservations are not required. Directions are available by calling the brewery at 888-258-7434, visiting the Frederick Brewing Co. website at http://www.fredbrew.com, or referring to the map on the bottom of a six-pack. Downloadable label artwork and brewery photographs are available at http://www.fredbrew.com/prphotos. # # #


                                                                    Exhibit 99.2

FOR IMMEDIATE RELEASE:                            CONTACT: Kimberly Cheseldine
July 20, 1998                                              Frederick Brewing Co.
                                                           301-694-7899 x113

                                                           I.W. Miller Group
                                                           714-833-9001


           FREDERICK BREWING CO. REPORTS GROWTH IN SALES, DISTRIBUTION
     FBC Closes Second Quarter with Revenue and Barrellage Increases of 82%


FREDERICK, MD - Frederick Brewing Co. (NASDAQ: BLUE) announced today that the
Company's second quarter, ended June 30, 1998, saw rapid revenue gains and
increased distribution. The Company also announced cost-cutting measures and a
series of strategic alliances that are expected to boost revenue and improve
capacity utilization in future periods.

Frederick Brewing Co. (FBC) gross revenues for the second quarter were
approximately $1.6 million on shipments of 8,861 barrels. These sales represent
a revenue gain of 82% and a barrellage increase of 82% over the same period last
year ($875,000 in revenues on 4,864 barrels shipped).

Second quarter 1998 results are the first to reflect a full quarter's sales of
the Company's newly-acquired Wild Goose(R) and Brimstone(TM) brands, sales of
which were not included in figures for the second quarter of 1997.

For the first six months of 1998, gross revenues have increased 129% ($2.6
million for 1998 v. $1.14 million for 1997) and shipments have increased 120%
(14,657 barrels in 1998 v. 6611 in 1997).

 "We attribute the sales increase to the Company's intensified local marketing
efforts, increased distribution of the Hempen(TM) brands, and stronger consumer
demand for the Wild Goose(R) and Brimstone(TM) brands," said FBC President and
COO Marjorie McGinnis. She also noted that the increases were achieved despite
the elimination of several beer styles from the Blue Ridge(R) and Wild Goose(R)
product lines. These discontinued products had accounted for approximately ten
percent of the combined companies' sales in 1997.

Distribution of the Company's Hempen(TM) brands increased to include the San
Francisco Bay Area and Southern California. Authorization for product
distribution has been obtained in

several New York and New Jersey chain stores, including A&P, Food Emporium and Shop Rite, and nearly 3,000 cases of FBC beer have arrived in China for distribution in June 1998. Frederick Brewing Co. Chairman and CEO Kevin Brannon stated that the quarter's results were encouraging. "Compared to last year, we sold a lot more beer while reducing our sales and marketing spending and holding our other overhead spending at virtually the same levels." He also said the Company has implemented a cost reduction program, reducing annual personnel expenditures by approximately $200,000 below the levels of the first quarter of 1998. Brannon said five salaried positions have been eliminated and senior managers have accepted salary reductions totaling $37,000 in exchange for grants of restricted stock. Brannon said the savings would be fully realized beginning in the current (third) quarter. The write-off of the terminated investor relations contract eliminates an ongoing charge of approximately $68,000 per quarter, further improving future results. FBC also announced three strategic alliances that the Company expects to increase plant utilization, margins and revenues by as much as $2 million annually, beginning the fourth quarter of 1998: In a joint venture with C&L Brewing Co., a wholly-owned African-American firm, FBC will produce a new brand of beer targeted toward a fast-growing influential segment of the marketplace. Marketing is scheduled to begin September 1998 in the Mid-Atlantic region. FBC has contracted with Toronto-based, Imported Brands of Canada, an experienced alcohol beverage importer, to represent the Hempen(TM) brands in the highly regulated Canadian market. The first shipments to Ontario should begin in August. Applications are pending in other provinces. FBC has executed a letter of intent with AAM Group, Inc., a Maryland importer of Belgian beer, to produce a proprietary brand for export to Northern China. The brand will be distributed in China by the Harbin Brewery, the dominant regional brewer in the province that includes Harbin city, with a population of approximately 5 million. FBC President and COO Marjorie McGinnis said she could not accurately predict the revenues that would result from these deals, but did say, based on preliminary forecasts, FBC could achieve new revenues of $2 million per year, beginning in the fourth quarter of 1998. "Assuming these relationships are as successful as anticipated, the resulting revenues will go

a long way toward utilizing our excess capacity, improving our production efficiency and increasing our margins," McGinnis said. Complete second quarter results will be reported on August 4, 1998. Third quarter reports should be available November 3, 1998. Except for historical information, this press release contains forward-looking statements that involve risks and uncertainties including, but not limited to, quarterly fluctuations in results, the actual management of growth, competition and other risks detailed in the Company's SEC filings. Actual results may differ materially from such information set forth herein. # # #


                                                                    Exhibit 99.3

FOR IMMEDIATE RELEASE:                            CONTACT: Andrea J. Keller
August 10, 1998                                            Frederick Brewing Co.
                                                           888-258-7434, x120

                        WILD GOOSE BREWERY SAVES THE BAY
                 Wild Goose and Chesapeake Bay Foundation Work
                      to Preserve Oyster Population in Bay

FREDERICK, MD--Wild Goose Brewery announced today its co-sponsorship of the
Chesapeake Bay Foundation (CBF) Adopt-an-Oyster program, committed to preserving
the oyster population in the Chesapeake Bay.

Together with Annapolis-based WRNR Radio, Wild Goose Brewery, Inc. and the
Chesapeake Bay Foundation (CBF) are encouraging consumers to "adopt" oysters and
help preserve the future of the Bay. Wild Goose summer beer displays feature
tear cards giving consumers the opportunity to donate $10 to support CBF's reef
restoration and oyster gardening projects, as well as CBF efforts to rebuild
oyster reefs by purchasing oysters from Tangier watermen and transplanting them
on protected reefs.

"We're very excited to participate in the CBF's Adopt-an-Oyster program," said
Jim Lutz, president of Wild Goose Brewery. "This is an excellent program and
although we have relocated to Frederick, we remain committed to the Chesapeake
Bay region and increasing awareness of the Chesapeake Bay Foundation's efforts
to preserve the future of the Bay."

The health of the Chesapeake Bay is in jeopardy. Less than one percent of
historic levels of oysters remain today. A hundred years ago, the Chesapeake Bay
oyster population could filter the entire Bay in three to six days. Today, it
would take the existing oyster stocks at least a year to do the same job. As
filter feeders, oysters remove sediment and algae that are harmful to the Bay's
plants and animals--a healthy adult oyster can filter about 50 gallons of water
a day.

The Chesapeake Bay Foundation is the largest nonprofit organization working to
restore and sustain the Bay's ecosystem. With more than 83,000 members
nationwide, CBF supports programs in environmental education and resource
protection.

Wild Goose Brewery Saves the Bay Page 2 of 2 Named one of the Top Ten Breweries in the World by the World Beer Championships in 1997, Wild Goose Brewery, Inc. is committed to helping preserve the Chesapeake Bay watershed. Partners since 1995, the brewery and CBF are working together to ensure the future of the Bay through the Adopt-an-Oyster program. Look for Wild Goose Adopt-an-Oyster donation tear cards on Wild Goose beer displays at your local retailer, and visit Wild Goose and WRNR radio at your favorite bars and restaurants this summer. # # #


                                                                    Exhibit 99.4

FOR IMMEDIATE RELEASE:                           CONTACT: Kym Cheseldine
August 17, 1998                                           Frederick Brewing Co.
                                                          301-694-7899 x113

                                                          I.W. Miller Group
                                                          714-833-9001

            Frederick Brewing Co. Rapid Revenue, Distribution Gains
                  to be Reviewed in "Open Line" Teleconference

FREDERICK, MD - Frederick Brewing Co. (NASDAQ: BLUE) announced today that
members of the executive management team will be available to discuss the second
quarter's results as part of an "open line" teleconference scheduled for August
18, beginning shortly after the market close at 4:15 p.m. Eastern Time (3:15
p.m. Central/2:15 p.m. Mountain/1:15 p.m. Pacific).

All current and prospective shareholders, institutional portfolio managers,
investment brokers, securities analysts, members of the brokerage community,
representatives of the trade and general business media and other interested
parties are welcome to participate in this conference call.

To take part in the Frederick Brewing Co. teleconference, which can be accessed
toll-free from anywhere in the U.S., participants are simply required to dial
800-230-1951 and register their name and corporate affiliation. International
callers can dial 612-332-0228 to participate.

Second quarter gross revenues were approximately $1.6 million on shipments of
8,861 barrels. These sales represent a revenue gain of 82% and a revised
barrellage increase of 82% over the same period last year ($875,000 in revenues
on 4,864 barrels shipped).

For the first six months of 1998, Frederick Brewing Co. gross revenues increased
136% ($2.6 million for 1998 v. $1.1 million for 1997) and shipments increased
127% (14,657 barrels in 1998 v. 6,470 in 1997).

Founded in 1993, Frederick Brewing Co. completed a successful initial public
offering (IPO) in 1996. In March 1997, the company moved from a converted
warehouse to a purpose-built, 57,000 square foot facility. In December 1997,
Frederick Brewing Co. merged with two other Maryland microbreweries, Wild Goose
Brewery, Inc. of Cambridge, MD and Brimstone Brewing Company of Baltimore, MD,
creating the largest craft brewery in the Mid-Atlantic region. Today, Frederick
Brewing Co.'s award-winning beers are sold in 33 states and the District of
Columbia.

Except for historical information, this press release contains forward-looking
statements that involve risks and uncertainties including, but not limited to,
quarterly fluctuations in results, the actual management of growth, competition
and other risks detailed in the Company's SEC filings. Actual results may differ
materially from such information set forth herein.

                                      # # #


                                                                    Exhibit 99.5

FOR IMMEDIATE RELEASE:                           CONTACT: Andrea J. Keller
August 28, 1998                                           Frederick Brewing Co.
                                                          888-258-7434, x120


                              HEMP BEER TAKES OFF!
              Frederick Brewing Co.'s Hempen Ale(TM) Now Available
                    at Burbank-Glendale International Airport

FREDERICK, MD -- Frederick Brewing Co. (NASDAQ: BLUE) announced today that its
award-winning beer, Hempen Ale(TM) -- North America's first craft beer brewed
with hemp seeds -- is now available at all five bars in California's
Burbank-Glendale International Airport.

"This is further affirmation that Hempen Ale(TM) and Hempen Gold(TM) are
exciting new products that have just taken off!" said Frederick Brewing Co.
(FBC) President and COO Marjorie McGinnis. "We hope next to introduce both beers
to Los Angeles-area chain and independent retail stores."

The hemp seeds used in Hempen Ale(TM) and Hempen Gold(TM) do not contain
tetrahydrocannabinol (THC), the psychoactive ingredient in marijuana, although
hemp and marijuana are botanically related. The U.S. Bureau of Alcohol, Tobacco
and Firearms has approved both Hempen Ale(TM) and Hempen Gold(TM) for
distribution.

In 1997, Hempen Ale(TM) was awarded a bronze medal for brewing excellence in the
herb/spice category at the 16th Great American Beer Festival(TM), the nation's
largest and most prestigious beer event. Hempen Ale(TM) was also an award-winner
at the 1997 Hemp Industries Association conference, where it was recognized by
HempWorld magazine for product innovation. Most recently, as mentioned in the
June 1998 issue of Progressive Grocer magazine, Hempen Ale(TM) has been selected
as one of eight American products -- representing the most distinguished
products from the United States -- in the competition for the international Sial
D'or food industry awards.

Founded in 1993 with the Blue Ridge brand of beers, Frederick Brewing Co.
completed an initial public offering (IPO) in 1996. In March 1997, the company
moved from a

converted warehouse to a purpose-built, 57,000 square foot facility. In December 1997, FBC acquired two other microbreweries, Wild Goose Brewery, Inc. and Brimstone Brewing Co., creating the largest craft brewery in the Mid-Atlantic region. Today, Frederick Brewing Co.'s award-winning beers are sold in 33 states and the District of Columbia. FBC shares are traded under the NASDAQ symbol: BLUE. # # #


                                                                    Exhibit 99.6

FOR IMMEDIATE RELEASE:                            CONTACT: Andrea J. Keller
September 14, 1998                                         Frederick Brewing Co.
                                                           301-694-7899,x120

                           Wild (Winter) Goose is Back
               SnowGoose(TM) Winter Ale Available October 19, 1998


FREDERICK, MD--Wild Goose Brewery announced today the return of SnowGoose(TM)
Winter Ale, first brewed the winter of 1992. A rich ale, SnowGoose(TM) has a
round, toasty body and a vibrant finish of Cascade, Willamette, Fuggles and East
Kent Goldings hops. And this award-winning seasonal ages well--enjoy its
complexity and earthy oakness long after the snow has melted away. Gold and
silver medal winner at the World Beer Championships.

This year's SnowGoose(TM) Winter Ale features new packaging and label artwork
created by Studio 105 of Shepardstown, West Virginia.

Wild Goose(R) SnowGoose(TM) Winter Ale Specifications:

MALTS:                Pale, Crystal, Chocolate, Roasted Barley, Carapils, Wheat
HOPS:                 Cascade, Willamette, Fuggles, East Kent Goldings
BITTERNESS:           50 IBUs
COLOR:                Garnet, Dark Ruby Red
GRAVITY:              16.0 Plato
ALCOHOL:              6.5%
CO2:                  2.4 Vol.


One of the East Coast's first microbreweries, Wild Goose Brewery, Inc. was
founded in 1989. Since then, Wild Goose(R) has been known for its traditional,
hand-crafted, English-


style ales, which are made with only the finest imported British malted barley and Ringwood yeast. Named one of the "Top 10 Breweries of the Year" by the 1997 World Beer Championships, Wild Goose(R)'s award-winning, year-round styles include India Pale Ale, Amber, Porter and Oatmeal Stout. Founded in 1993 with the Blue Ridge(R) brand of beers, Frederick Brewing Co. completed an initial public offering (IPO) in 1996. In March 1997, the company moved from a converted warehouse to a purpose-built, 57,000 square foot facility. In December 1997, FBC acquired two other microbreweries, Wild Goose Brewery, Inc. and Brimstone Brewing Co., creating the largest craft brewery in the Mid-Atlantic region. Today, Frederick Brewing Co.'s award-winning beers are sold in 33 states and the District of Columbia. FBC shares are traded under the NASDAQ symbol: BLUE. Free public tours and tastings are held at Frederick Brewing Co.'s brewery every Saturday and Sunday at 1:30 p.m. Reservations are not required. Directions are available by calling the brewery at 888-258-7434, visiting the Frederick Brewing Co. website at http://www.fredbrew.com, or referring to the map on the bottom of a six-pack. Downloadable label artwork and brewery photographs are available at http://www.fredbrew.com/prphotos. # # #


                                                                    Exhibit 99.7

FOR IMMEDIATE RELEASE:                           CONTACT: Andrea J. Keller
September 14, 1998                                        Frederick Brewing Co.
                                                          301-694-7899, x120

                           Screaming Snowball Spotted
                          on Blue Ridge(R) Beer Bottles
Brewery Alerts Excited Public: Snowball's Chance(TM) Available October 26, 1998


FREDERICK, MD--Frederick Brewing Co. (FBC) announced today the October 26th
release of Snowball's Chance(TM), the popular Blue Ridge(R) winter seasonal with
a nutty malt character (we're describing the beer here, not the screaming
snowball icon) and a smooth, dry finish.

It all started on a Wednesday evening a long, long time ago (actually, late
September 1996). Several members of the FBC crew were sitting around the tap
room after work discussing the potential introduction of a new Blue Ridge winter
seasonal. The FBC crew had only three weeks to develop packaging and a recipe,
so they had to make a decision - fast! "We don't have a snowball's chance in
hell of coming out with a beer in time," said one member of the group, "we don't
even have a name for it!" With that, our head brewer hurried off to his kettles
and Snowball's Chance(TM), our most popular seasonal beer, was born. Look for
the screaming snowball on Snowball's Chance(TM) packaging and point of sale
materials.

Blue Ridge(R) Snowball's Chance(TM) Specifications:

Malts:              2-row, Munich 20 and 10, Special Roast, Caramel 40, Victory,
                    Chocolate
Hops:               Columbia, Mt. Hood
Bitterness:         30 IBUs
Color:              Ruby Red
Gravity:            16 Plato
Alcohol:            6.0% by volume
Co2:                2.6 Vol.

Founded in 1993 with the Blue Ridge(R) brand of beers, Frederick Brewing Co. completed an initial public offering (IPO) in 1996. In March 1997, the company moved from a converted warehouse to a purpose-built, 57,000 square foot facility. In December 1997, FBC acquired two other microbreweries, Wild Goose Brewery, Inc. and Brimstone Brewing Co., creating the largest craft brewery in the Mid-Atlantic region. Today, Frederick Brewing Co.'s award-winning beers are sold in 33 states and the District of Columbia. FBC shares are traded under the NASDAQ symbol: BLUE. # # #


                                                                    Exhibit 99.8

NASDAQ LOGO

The Nasdaq Stock Market, Inc.
1735 K Street, NW
Washington, DC 20006-1500
202 496 2500
Fax 202 496 2699

VIA FACSIMILE & REGULAR MAIL

September 15, 1998

Mr. Kevin Brannon
Chairman and CEO
Frederick Brewing Company
4607 Wedgewood Boulevard
Frederick, MD 21703

Dear Mr. Brannon:

The purpose of my letter is to bring to your attention a concern regarding the
continued listing of Frederick Brewing Company's shares of common stock (BLUE)
on The Nasdaq SmallCap Market. Based upon the staff's review of the price data
covering the last thirty consecutive trade dates, your Company's shares of
common stock have failed to maintain a closing bid price greater than or equal
to $1.00. To be eligible for continued listing, all securities, the Company's
shares of common stock, must maintain a minimum bid price of $1.00.(1)

We recognize this deficiency may be a temporary situation, and no delisting
action with respect to the bid price deficiency will be initiated at this time.
Instead, the Company will be provided ninety (90) calendar days in which to
regain compliance with the minimum bid price requirement.(2) If at anytime
within the next ninety calendar days from the date of this letter, the shares of
common stock reports a closing bid price of $1.00 or greater for ten consecutive
trading days, it will have complied with the minimum bid price requirement.

However, if the Company is unable to demonstrate compliance with the minimum
$1.00 bid price on or before the end of the ninety day period December 14, 1998,
the Company's securities will be subject to delisting, effective with the close
of business on December 14, 1998. To stay the delisting, the Company may request
a hearing by the

-------------------
(1) Marketplace Rule 4310(c)(04).
(2) The ninety day period relates exclusively to the bid price deficiency. The
    Company may be delisted during the ninety day period for failure to maintain
    compliance with any other listing requirement for which it is currently on
    notice or which occurs during the period.

close of business on December 14, 1998. For more information on the hearing process, please contact the Listing Qualifications Hearing Department at (202) 496-2635. If you have any questions concerning the compliance issues discussed above, please call me at (202) 496-2669. Very truly yours, /s/ Robert J. McCormick ----------------------- Robert J. McCormick Analyst Nasdaq Listing Qualifications cc: Cam Funkhouser Market Surveillance